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Tax Incidence, Market Power, and Bargaining Structure

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  • Lockwood, Ben

Abstract

This paper considers the incidence of both factor taxes and an income/consumption tax in a general equilibrium model with unionized labor markets and imperfectly competitive product markets, focusing especially on the implications of different bargaining structures in the labor market for tax incidence. The determinants of tax incidence are shown to be very different from the competitive case; in particular, more than 100 percent shifting of general, as opposed to sector specific wage and income/consumption taxes is possible, and the shifting of the wage tax generally increases, rather than decreases, with the elasticity of substitution between labor and capital in production. Also, changes in firm market power and union bargaining power are shown to have counterintuitive effects on the degree of shifting of taxes. Copyright 1990 by Royal Economic Society.

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Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 42 (1990)
Issue (Month): 1 (January)
Pages: 187-209

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Handle: RePEc:oup:oxecpp:v:42:y:1990:i:1:p:187-209

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Cited by:
  1. Szabolcs Deák & Lionel Fontagné & Marco Maffezzoli & Massimiliano Marcellino, 2012. "The banking and distribution sectors in a small open economy DSGE Model," RSCAS Working Papers 2012/53, European University Institute.
  2. Silvia Rocha-Akis & Ronnie Schöb, 2010. "Welfare Policy in the Presence of Unionised Labour and Internationally Mobile Firms," CESifo Working Paper Series 3032, CESifo Group Munich.
  3. Kjell Erik Lommerud & Bjørn Sandvik & Odd Rune Straume, 2004. "Good Jobs, Bad Jobs and Redistribution," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(4), pages 703-720, December.
  4. Edward Calthrop & Bruno Borger, 2007. "On Tax Over-Shifting in Wage Bargaining Models," Atlantic Economic Journal, International Atlantic Economic Society, vol. 35(2), pages 127-143, June.
  5. Kolm, Ann-Sofie, 1998. "Differentiated payroll taxes, unemployment, and welfare," Journal of Public Economics, Elsevier, vol. 70(2), pages 255-271, November.
  6. Sophia Delipalla & Peter Sanfey, 1998. "Commodity Taxes, Wage Determination and Profits," Studies in Economics 9816, Department of Economics, University of Kent.
  7. Clemens Fuest & Bernd Huber, . "Tax Coordination and Unemployment," EPRU Working Paper Series 97-26, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  8. Silvia Rocha-Akis, 2006. "Labour tax policies and strategic offshoring under unionised oligopoly," Department of Economics Working Papers wuwp099, Vienna University of Economics, Department of Economics.
  9. Chae, Suchan, 2002. "Tax incidence with bargaining," Economics Letters, Elsevier, vol. 77(2), pages 199-204, October.

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